At present, low profit margins mean that operators are unlikely to enter into local partnerships involving civil society stakeholders due to the elevated risks.
Partnering with local community development organisations to deliver on new local livelihood-driven performance targets might make the risk worth taking, especially
if this leads to a more commercially viable level of subsidy.
2.4.4 Grameen Village Pay Phones, Bangladesh
xxxiii
The business model of the VPP programme combines the following elements: a high concentration of low-income customers;
detailed knowledge of customers; affordable micro-credit for equipment purchase, end-user equipment viewed as
an entrepreneurial activity, and entrepreneurial training provided, combined to increase subscriber demand;
concessional access rates to the network; minimal public sector involvement.
The model is interesting because it may have applications to other areas of ICT other than GST mobile phones, such as VSAT and W LL systems.
3 3
Development Aims
Traditional approaches to telecoms provision in Peru, first a government monopoly, then
since 1998, a liberalised competitive market, have made little progress in providing
telephony access to Peru’s highly dispersed rural areas. Recently the government has
pursued an innovative approach in which private operators meet defined requirements
for universal access in rural areas under contract to government, with a subsidy
component provided from a support fund, allocated by competitive auction based on the
criteria of ‘minimum subsidy’. The transaction design process involves three steps:
• selection of a project area based on expressed local demand and definition of
the service to be provided; • selection of an operator by competitive
least subsidy auction; and • results-based performance monitoring
Partners, Drivers and Contributions
• O SIPTEL – the Government regulator of private telecoms, has driven the design of
the scheme, with an objective of promoting universal service while retaining most of
the benefits of a competitive environment. O SIPTEL administers FITEL see below,
selects projects for funding and monitors compliance.
• FITEL: manages the development subsidy fund to support universal service provision.
This is funded by a levy on telecoms operators of 1 of their annual gross
revenue and is used exclusively for financing private services in rural areas of
social importance. FITEL also seeks to leverage private investment. FITEL has
future plans to broaden its economic impact, including the development of
telecentres and extension of pilot projects which include development applications.
• Private ser vice providers – notably GTH Peru and RuralTelecom Co. – provided
the winning bids. They have invested in i nfrastructure and operate the rural
network under a contractual requirement to serve remote areas. Profitability has been
enabled by the subsidy from FITEL, which is paid twice a year subject to performance.
The Partnering Process
This is a contractual Public-Private Partnership with limited civil society engagement at least
at this stage. Its design has been driven by the public sector, drawing on international
best practice in transaction design.
O utcomes and Value Added
The programme has succeeded in increasing rural access. By the end of 2003, 5,000
settlements will have access to around 10,000 public telephones. It has met most of
the government aims, but provided only marginal financial returns for the private
providers. The level of subsidy bidded for by the operators was surprisingly low. This has
led to some disquiet over whether the least- cost-subsidy approach of competitive
tendering might not reduce the financial incentive of future operators to bid for
concessions in the remoter areas of the country.
CASE-STUDY 3
PPEERRUU TTEELLEECCOOM MSS IINNVVEESSTTM
MEENNTT FFUUNNDD
Development Aims
The Village Pay Phone VPP programme of GrameenPhone GP and the Grameen Bank
GB seeks to expand rural connectivity as a mea ns o f eco no mi c emp o w er ment –
particularly of poor women. Bangladesh is one of the world’s least-wired countries, with
very little rural access. The long-term goal is to place a phone in each of Bangladesh’s
68,000 villages.
Partners, Drivers and Contributions
• G r a meen Phone G P: A commer ci a l organisation – with four institutional
owners including GrameenTelecom see below and companies from the US,
N orway and Japan – which is now the country’s dominant mobile phone service
provider in both urban and rural areas. GP contributes access to its existing
infrastructure network and technology at a concessional rate.
• Grameen Bank Grameen Telecom: The Grameen BankGB is an N GO specialising
in rural micro-credit with a presence in 3 5 , 0 0 0 vi l l a g es i n Ba n g l a d esh .
G rameenTelecom G T is a non-profit su b si d i a r y o f G B t h a t h a n d l e s
telecommuni ca ti ons p r og r a mmes. G B leverages its extensive presence and
programme in rural areas to operate the VPP, to p r ovi d e d eta i led know led ge of
r ur a l custo mer s, ex p a n d ef f ecti ve economic demand for phone services, and
provide credit for handset purchase • Individual women micro-entrepreneurs –
one in each village – are provided with a handset on credit, and trained to extend
services to the whole village as a micro- business.
The Partnering Process
This is a private N G O par tnership with minimal public involvement see comment.
The p r i ma r y p a r tner s ha ve a cl o se institutional relationship. Both partners were
involved in conception and design of the VPP, which sought to deepen the outreach of
GP’s existing services while also contributing to GB’s social development objectives. GP
applied for and won a mobile phone licence. However, there has been no other overt
government involvement in the VPP.
O utcomes and Value Added
The VPP has substantially increased rural access to telecommunications in Bangladesh.
By the end of 2001,more than 5,000 villages had been reached – however, progress
toward the ambitious goal of the venture has b een sl o w er th a n h o p ed f o r d ue to
regulatory and infrastructural bottlenecks. For GP, the VPP is profitable. For GB, the
programme contributes to its social goals of i ncr eased r ur al access and economi c
empowerment of poor rural women, as well as returning a small profit for use in its other
operations. Had GP attempted to offer rural services without GB involvement, subscriber
uptake would have been much slower due to affordability factorsas is the case with some
competitors.
CASE-STUDY 4
GGRRAAM MEEEENN VVIILLLLAAGGEE PPAAYY PPHHOONNEESS,, BBAANNGGLLAADDEESSHH
The inability to engage the public sector – notably the telecoms agency, BTTB – in the partnership has possibly weakened the model. BTTB has a monopoly over the
antiquated fixed line network, and has been unable to increase its interconnect capacity despite GP’s offer to assist. Thus mobile operators are unable to connect
additional phones to the national switched network and instead have had to offer primarily mobile-to-mobile phone services.
O verlaying the above business model on the DO I Dynamic Development framework allows us to gauge which other strategic ICT components might need
to be put in place to enhance the reach of the VVP. This perhaps includes the stimulation of demand for mobile phone services through the creation of other
forms of micro-enterprise, development of relevant local content and integration with existing public services in health and education and government services.
2.4.5 Ericsson Response – Disaster Relief
